British Airways looks forward to profits lift-off

SOARING FUEL prices have almost halved profits at British Airways over the past three months.

The airline, which has had to cut fares amid tough competition from low- cost operators, also warned that ticket prices were still expected to decline over the next few months.

But BA has seen a recovery in first- and business-class travel, as well as growing cargo traffic, which will lift its revenues for the year. Surcharges to cover the additional fuel surcharges and higher passenger numbers were helping offset some of the pain.

Its shares rose nearly 2 per cent to 274.5p on news that BA had beaten most forecasts and was predicting a 3 to 3.5 per cent increase in revenues for the year to the end of March.

Rod Eddington, the chief executive, called the results "respectable" given the 47 per cent increase in fuel charges. It expects its fuel bill for the year to March 2005 to be pounds 245m higher than in 2003/04.

"Our focus remains on reducing controllable costs and debt while continuing to invest," Mr Eddington said. Pre-tax profits for the three months to the end of December were pounds 75m, compared with pounds 125m in the same period in 2003. But since the start of the year, revenues have been improving.

Passenger numbers in January were up 2.2 per cent, and the average revenue per passenger was up more than 8 per cent. Within this, first- and business- class traffic was up nearly 12 per cent. BA's cargo business rose 14.2 per cent, and its load factor - a measure of seats filled as a proportion of capacity - rose 3.3 percentage points to 68.1 per cent.

BA, however, maintained a cautious note, saying that the short-haul European market was still extremely competitive.